24 May 2024
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Consumer Duty - next steps

To The Point
(4 min read)

As we know the Duty isn’t a "once and done" event. It’s something that needs to shift from one-off implementation activity to become part of the firm's culture and business, running across its whole organisation from Board to front-line delivery, from product design to communications and customer support. In its recent publications, including the findings from its review of consumer duty implementation, the Financial Conduct Authority (FCA) has set some key focus areas and milestones that the firms should be looking at to meet the ongoing expectations under the Duty.

The Consumer Duty remains a top priority for the FCA and we have seen several publications from them highlighting its engagement across all sectors to test firms’ implementation and embedding of the Duty. Here are some of the focus areas and milestones that the FCA has highlighted for firms to concentrate on in the upcoming months to meet the ongoing expectations under the Duty:

  • Closed products and services - The immediate key deadline for firms is the application of the Duty to closed products and services. There will be differences in how some elements of the Duty will apply to closed products and firms need to consider this. On 16 May the FCA published a series of Dear CEO letters covering multiple sectors to assist firms with their final preparations for 31 July 2024 deadline. The letters emphasise on the priority issues that are particularly acute or widespread in closed products and services and include action prompts to ensure firms are prepared for the application of the Duty to closed products and services.
  • Board reports and MI - In its recent publications the FCA has said that firms should now be considering their annual board report. The FCA will use this as evidence to assess a firm’s ongoing compliance with the Duty and will require firms to provide this and the management information that sits behind it, on request.
  • Complaints data - The FCA has said that it will be looking at firms’ complaints data in the context of the duty, identifying where the Financial Ombudsman Service uphold high numbers of complaints.
  • Consumer duty implementation: areas for improvement - In its findings published in February 2024 on its review of consumer duty implementation the FCA highlighted areas for improvement. Firms need to ensure that the focus on good customer outcomes is understood at all levels and that they proactively tackle issues. They should improve processes to track vulnerable customers across multiple product sets and share information more effectively across supply chains. Additionally, firms must better understand their role in the distribution chain and their responsibilities under the Duty. They need to demonstrate how their products offer fair value to customers, remove negative obstacles and "sludge" practices in customer journeys, and ensure that staff are trained to an appropriate level to handle complex conversations with customers, thereby supporting good outcomes.
  • Consumer support outcome - The FCA has been clear that they will make use of the data from their Financial Lives survey to monitor customers' experience and test the embeddedness of the Duty. The Financial Lives 2022 survey found that 7.4 million adults made unsuccessful contact attempts to their financial services providers and 4.3 million received information from their providers they could not understand, was not what was needed or was not timely. The FCA has clarified that it expects firms to provide support that meets their customers’ needs so that customers do not face unreasonable barriers when they need to access support, and they get the support they need when they contact their provider. Given that to date the FCA has been focusing on tackling the greatest harms and areas of concern under the Duty, it is likely that it will be monitoring the consumer support outcome that firms are delivering under the Duty. This may include assessing the level of customer support that firms offer, the types and nature of the various customer support channels that firms may be using and how good outcomes are being delivered and monitored by firms.

So what?

Firms should monitor the FCA's directions of travel for the Duty and consider the steps they need to take to comply with the next milestones under the Duty. The Duty is now an integral part of the FCA's approach and mindset at every stage of the regulatory lifecycle – including authorisations, policy development, supervision and enforcement. It is clear from the various surveys and information requests that the FCA has undertaken to date that it will be increasingly relying on the use of data to identify, monitor and confirm that firms are delivering good customer outcomes under the Duty. Firms should therefore expect, and be prepared for, further reviews, data requests and surveys from the FCA in the coming months to test firms’ implementation and embedding of the Duty.

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